An SEC news release said the rule also
requires the disclosure of the structure of firms’ incentive-based
compensation practices.

The proposed
rule stems from Section 956 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, which requires the SEC and several other
agencies to jointly write rules and guidelines. The
SEC-regulated financial institutions affected by the rulemaking include
broker/dealers and investment advisers with $1 billion or more in
assets.

The proposed rules would:

Require reports related to incentive-based compensation to be filed annually with SEC;

Prohibit incentive-based compensation
arrangements that encourage inappropriate risk-taking by providing
excessive compensation or that could lead to material financial loss to
the firm;

Provide additional requirements for
financial institutions with $50 billion or more in assets, including
deferral of incentive-based compensation of executive officers and
approval of compensation for people whose job functions give them the
ability to expose the firm to a substantial amount of risk; and

Require firms to develop policies and
procedures that ensure and monitor compliance with requirements related
to incentive-based compensation.